For use at 2:00 PM EDT

Wednesday
July 12, 2023

The Beige Book

Summary of Commentary on Current Economic Conditions
By Federal Reserve District

June 2023
 Federal Reserve Districts

Minneapolis Boston

New York
Chicago Cleveland
San Francisco Philadelphia

Kansas City St. Louis

Richmond

Atlanta
Dallas

Alaska and Hawaii The System serves commonwealths and territories as follows: the New York Bank serves the
are part of the Commonwealth of Puerto Rico and the U.S. Virgin Islands; the San Francisco Bank serves
American Samoa, Guam, and the Commonwealth of the Northern Mariana Islands.
San Francisco District.

This report was prepared at the Federal Reserve Bank of Minneapolis based on information collected
on or before June 30, 2023. This document summarizes comments received from contacts outside the
Federal Reserve System and is not a commentary on the views of Federal Reserve officials.
National Summary 1 What is the Beige Book?
The Beige Book is a Federal Reserve System publication about current
economic conditions across the 12 Federal Reserve Districts. It charac-
Boston A-1 terizes regional economic conditions and prospects based on a variety
First District of mostly qualitative information, gathered directly from each District’s
sources. Reports are published eight times per year.
New York B-1 What is the purpose of the Beige Book?
Second District The Beige Book is intended to characterize the change in economic
conditions since the last report. Outreach for the Beige Book is one of
Philadelphia C-1 many ways the Federal Reserve System engages with businesses and
Third District other organizations about economic developments in their communi-
ties. Because this information is collected from a wide range of con-
tacts through a variety of formal and informal methods, the Beige Book
Cleveland D-1 can complement other forms of regional information gathering. The
Fourth District Beige Book is not a commentary on the views of Federal Reserve
officials.
Richmond E-1 How is the information collected?
Fifth District Each Federal Reserve Bank gathers information on current economic
conditions in its District through reports from Bank and Branch direc-
Atlanta F-1 tors, plus interviews and online questionnaires completed by business-
Sixth District es, community organizations, economists, market experts, and other
sources. Contacts are not selected at random; rather, Banks strive to
curate a diverse set of sources that can provide accurate and objective
Chicago G-1 information about a broad range of economic activities. The Beige
Seventh District Book serves as a regular summary of this information for the public.

St. Louis H-1 How is the information used?

The information from contacts supplements the data and analysis used
Eighth District
by Federal Reserve economists and staff to assess economic condi-
tions in the Federal Reserve Districts. The qualitative nature of the
Minneapolis I-1 Beige Book creates an opportunity to characterize dynamics and identi-
Ninth District fy emerging trends in the economy that may not be readily apparent in
the available economic data. This information enables comparison of
economic conditions in different parts of the country, which can be
Kansas City J-1
helpful for assessing the outlook for the national economy.
Tenth District
The Beige Book does not have the type of information I’m looking
Dallas K-1 for. What other information is available?
Eleventh District The Federal Reserve System conducts a wide array of recurring sur-
veys of businesses, households, and community organizations. A list of
statistical releases compiled by the Federal Reserve Board is available
San Francisco L-1 here, links to each of the Federal Reserve Banks are available here,
Twelfth District and a summary of the System’s community outreach is available here.
In addition, Fed Listens events have been held around the country to
hear about how monetary policy affects peoples’ daily lives and liveli-
hoods. The System also relies on a variety of advisory councils—
whose members are drawn from a wide array of businesses, non-profit
organizations, and community groups—to hear diverse perspectives on
the economy in carrying out its responsibilities.
National Summary
The Beige Book ■ June 2023

Overall Economic Activity

Overall economic activity increased slightly since late May. Five Districts reported slight or modest growth, five noted
no change, and two reported slight and modest declines. Reports on consumer spending were mixed; growth was
generally observed in consumer services, but some retailers noted shifts away from discretionary spending. Tourism
and travel activity was robust, and hospitality contacts expected a busy summer season. Auto sales remained un-
changed or exhibited moderate growth across most Districts. Manufacturing activity edged up in half of the Districts and
declined in the other half. Transportation activity was down or flat in most Districts that reported on it, as some contacts
reported reduced demand due to high inventory levels and others noted continued challenges from labor shortages.
Banking conditions were mostly subdued, as lending activity continued to soften. Despite higher mortgage rates, de-
mand for residential real estate remained steady, although sales were constrained by low inventories. Construction for
both residential and commercial units was slightly lower on balance. Agricultural conditions were mixed geographically
but softened slightly on balance, with some contacts expecting further softening for the remainder of 2023. Energy
activity decreased. Overall economic expectations for the coming months generally continued to call for slow growth.

Labor Markets
Employment increased modestly this period, with most Districts experiencing some job growth. Labor demand re-
mained healthy, though some contacts reported that hiring was getting more targeted and selective. Employers contin-
ued to have difficulty finding workers, particularly in health care, transportation, and hospitality, and for high-skilled
positions in general. However, many Districts reported that labor availability had improved and that some employers
were having an easier time hiring than they were having previously. Employers also reported that the unusually high
turnover rates in recent years appear to be returning to pre-pandemic norms. Wages continued to rise, but more mod-
erately. Contacts in multiple Districts reported that wage increases were returning to or nearing pre-pandemic levels.

Prices
Prices increased at a modest pace overall, and several Districts noted some slowing in the pace of increase. Consumer
prices generally increased, though reports differed in the extent to which firms were able to pass along input cost in-
creases. Contacts in some Districts noted reluctance to raise prices because consumers had grown more sensitive to
prices, while others reported that solid demand allowed firms to maintain margins. Input cost pressures remained ele-
vated for services firms but eased notably in the manufacturing sector. Freight rates continued to decrease, along with
the prices for many construction inputs, though concrete prices increased. Price expectations were generally stable or
lower over the next several months.

Highlights by Federal Reserve District

Boston
Business activity expanded at a slight pace. Employment
gains were small and prices were stable. Consumer
spending increased by a small margin. Manufacturers
reported moderate revenue growth. Home sales were
disappointing and life sciences leasing activity slowed
dramatically. The outlook was optimistic outside of real
estate, but remained neutral or became increasingly
pessimistic among real estate contacts.
New York
Regional economic activity stabilized after a period of
weakness. Labor market conditions were strong, with
some firming in recent weeks. Inflationary pressures
eased noticeably. Consumer spending grew steadily.
Housing markets were solid but low inventory continued
to restrain sales activity.

1

Philadelphia
Business activity continued to decline slightly during the
current Beige Book period. Consumer demand ticked
down, although elevated profit margins buoyed overall
sales figures. Employment fell slightly despite improved
labor availability. Wage growth and inflation subsided but
continued at a modest pace. Expectations for economic
growth remained subdued.
Cleveland
The Fourth District economy was generally stable in
recent weeks as high interest rates continued to con-
strain households’ big-ticket goods purchases and busi-
nesses’ project plans. Bankers and transportation firms
cited these effects as contributing to weaker demand for
their own services. Nevertheless, contacts were general-
ly more optimistic about the near-term outlook and less
concerned that a U.S. recession would occur in 2023.
Richmond
The regional economy grew slightly in recent weeks.
Consumer spending on retail goods, as well as on travel
and tourism, picked up modestly. Manufacturing and
transportation sectors noted a slowdown in demand.
Residential real estate was constrained by a lack of
inventory. Commercial real estate activity and lending
declined. Employment increased moderately and price
growth eased slightly but remained robust, overall.
Atlanta
Economic activity grew slowly. Labor markets became
less tight, and wage pressures eased. Nonlabor costs
moderated, on balance. Discretionary retail sales sof-
tened. Auto sales remained strong. Domestic leisure
travel softened, and international and business travel
rose. Housing demand remained strong. Transportation
activity slowed. Energy demand was steady. Agriculture
conditions softened.
Chicago
Economic activity was little changed. Employment in-
creased moderately; nonbusiness contacts saw little
change in activity; consumer spending was flat; business
spending and construction and real estate activity de-
clined slightly; and manufacturing decreased modestly.
Prices and wages rose moderately, while financial condi-
tions tightened slightly further. Expectations for farm
incomes in 2023 decreased some.
2
National Summary
St. Louis
Economic conditions have remained unchanged since
our previous report. Employers continued to struggle
finding skilled workers, but turnover slowed and wage
pressures lessened. Consumer spending was largely
steady, but contacts reported a shift away from discre-
tionary goods. Homebuying activity increased, but the
commercial real estate sector saw worsening conditions.
Minneapolis
Economic activity in the region grew slightly in recent
weeks. Employment rose moderately as labor availability
improved. Price pressures were mild and wages rose
moderately. Consumer spending was flat. Professional
services reported solid activity and a positive outlook.
Residential construction and real estate remained low.
Dry conditions have lowered the farm outlook. Minority-
and women-owned firms reported steady activity.
Kansas City
Total economic activity across the Tenth District
changed little during June. Though hiring was flat, ex-
pected employment levels at most businesses continued
to point downward. Businesses predominantly reported
they are relying on natural turnover and attrition to re-
duce their headcounts, rather than layoffs. Concerns
about credit quality and credit access rose broadly,
including among micro-businesses, consumers, and
commercial real estate.
Dallas
Modest expansion continued buoyed by gains in the
service sector and single-family housing. Factory output,
drilling activity and loan demand declined, and credit
conditions tightened further. Employment rose moderate-
ly, and wage growth remained high. Price pressures
evaporated in manufacturing but stayed elevated in the
service sector. Uncertainty continued to rise, and con-
tacts cited diminishing demand, higher labor costs, rising
interest rates, and inflation as their primary outlook con-
cerns.
San Francisco
Economic activity softened modestly. Labor availability
improved across sectors. Wage growth slowed notably
while price increases persisted. Retail sales moderated,
and activity in the services sectors eased somewhat.
Manufacturing activity was solid but weakened slightly,
while conditions in the agriculture and residential real
estate sectors were mixed. Commercial real estate
activity fell, and financial sector activity was largely un-
changed.
 Federal Reserve Bank of Boston
The Beige Book ■ June 2023

Summary of Economic Activity

Business activity expanded at a slight pace in recent weeks, with modest increases in employment and roughly even
prices. Consumer spending increased by a small margin, as retail sales increased modestly and tourism was flat. Manu-
facturers reported mixed results but sales growth was moderate on average. Software and IT services firms enjoyed
stable demand and modest revenue gains. Residential home sales increased slightly in May from the previous month
but remained below seasonal norms. Commercial real estate markets weakened further, with abrupt declines in life
sciences leasing and financial distress showing up for office properties. The outlook was mostly optimistic among con-
tacts outside of real estate. Residential real estate contacts expected sales to remain muted and commercial real estate
contacts braced for declines in activity and property values moving forward.

Labor Markets output prices were flat. Manufacturing contacts reported

Employment increased modestly and wage growth con-
tinued to moderate as labor market imbalances eased
further. Among retail and tourism contacts, labor demand
remained healthy but showed signs of moderating, and
there were modest improvements in the available labor
supply. Some airline contacts continued to struggle to fill
positions but said that hiring and training were underway
to improve the situation. A clothing retailer noted that it
had taken several months to fill 200 warehouse jobs, but
they were nonetheless able to fill all positions. Following
two summers of worker shortages on Cape Cod, some
restaurant and hotel owners there have achieved effi-
ciencies enabling them to operate with a smaller staff. In
manufacturing, the labor market remained tight, although
contacts said that it had improved over last year, and
headcounts increased modestly. Headcounts at software
and IT firms were up slightly, and hiring plans were
mixed. Contacts noted that turnover had either stabilized
(albeit at above-average rates) or decreased in recent
months, and reductions in turnover and absenteeism
reduced the need for hiring at some firms. Wage pres-
sures were described as stable or, in most cases, declin-
ing, as wage growth rates continued to fall back to more
moderate levels.
Prices
Prices were mostly stable, with some exceptions, as cost
pressures abated further. A clothing retailer said that
input cost growth had ceased altogether and that their
a very benign pricing environment, with one even men-
tioning the possibility of deflation. Prices were slightly
higher among IT contacts, but with no further price in-
creases anticipated. Hotel room rates in Greater Boston
increased in excess of seasonal patterns, rising 12 per-
cent on a year-over-year basis. Cape Cod rental prices
increased yet again, but at a much more modest pace
than in recent years. The outlook called for further mod-
eration of pricing pressures moving forward.
Retail and Tourism
First District retail contacts reported a modest uptick in
sales relative to earlier this year, while tourism contacts
saw mixed results that were about flat on average. A
clothing retailer enjoyed a slight uptick in demand this
spring after a soft first quarter. Mainstreet retailers on
Cape Cod experienced a strong start to the high season,
but hospitality contacts on the Cape said that occupancy
rates for hotels and especially short-term rentals were
down by modest to large margins from their record highs
of the past two years, though still above 2019 levels.
Airline passenger traffic through Boston further in-
creased in recent months, reaching 96 percent of pre-
pandemic levels in the first quarter of 2023, and interna-
tional passenger traffic alone reached 99 percent of pre-
pandemic levels, although travel to and from Asian mar-
kets remained depressed. The Greater Boston hotel
occupancy rate increased relative to seasonal trends,

A-1

with occupancy climbing ever closer to 2019 levels.
Scheduled convention activity and cruise bookings for
the remainder of the year are set to increase further,
exceeding 2019 levels.
Manufacturing and Related Services
Manufacturing contacts were generally positive, report-
ing moderate gains in sales on balance. A pharmaceuti-
cal company reported lower sales that were nonetheless
in line with their expectations, owing to increased com-
petition from generics. A frozen fish producer said that
sales were down year-on-year due to higher prices.
Other contacts reported very strong sales. A furniture
producer recorded its best second-quarter results ever,
up markedly from a weak first quarter. A semiconductor
manufacturer said that, despite an industrywide slump,
their own sales were up 12 percent from a year earlier,
an outcome attributed to the firm’s heavy exposure to the
automotive industry and the transition to electric cars.
One contact said they had revised their capital expendi-
ture plans to take advantage of tax credits, although this
mostly involved moving existing projects forward rather
than adding investments. The outlook was positive
across the board. The semiconductor manufacturer in
particular expected that 2024 would bring demand in-
creases linked to upgrades of phones and PCs as well
as from the diffusion of AI products.
IT and Software Services
Contacts in IT and software services posted modest
revenue gains on average, and demand was steady over
the first two quarters of 2023. Profits and margins were
up slightly, although Q2 expenses increased above
expectations at one firm. Capital and technology spend-
ing was unchanged or down somewhat. One firm ex-
pected to slow its capital spending further moving for-
ward amidst an ongoing transition to the cloud. Outlooks
were generally optimistic, with expectations of ongoing
stability in demand. One contact expressed confidence
that their business would hold up well moving forward
even if the broader economy turned down. However, one
contact was concerned the presidential election might
disrupt the stability of the business environment.
Commercial Real Estate
Commercial real estate activity in the First District was
moderately weaker in recent months. Office leasing was
stable or down slightly, with very few leases signed.
Office rents were roughly stable and vacancy rates were
said to be either flat or rising slowly. A contact in Con-
necticut reported a high-quality urban office building
being forced into foreclosure due to tenants giving back
space upon lease expiration. Life sciences leasing activi-
ty slowed dramatically, a fact attributed to the drying up
A-2
Federal Reserve Bank of Boston
of venture capital and other funding sources to would-be
tenants. Contacts reported a somewhat quieter industrial
market than in the past two years, although industrial
rents remained high and vacancy rates historically low.
Grocery-anchored retail continued to perform well, but
other retail vacancies ticked up due to the failure of
some non-grocery chains. Across sectors, contacts’
expectations turned more pessimistic. High borrowing
costs are expected to continue to deter investment,
sales, and construction. Multiple contacts expected the
market to fare better in New England than in other re-
gions of the country, but nonetheless expected activity in
the region to slow and property valuations to fall accord-
ingly.
Residential Real Estate
First District home sales increased a bit in May from the
previous month on average, and some areas reported a
healthy uptick in activity, but May’s sales were nonethe-
less described as weak relative to historical norms.
Across markets, home sales continued to post very
steep declines on a year-over-year basis, for single-
family dwelling as well as condos. According to contacts,
activity was held back yet again by further declines in
inventory (on a year-over-year basis) and persistently
high mortgage interest rates. High rates also exacerbat-
ed the low-inventory problem, as current homeowners
were reluctant to swap their existing, low-rate mortgages
for higher-rate loans, leading to fewer homes going up
for sale. Despite tepid sales, the dearth of inventories
relative to demand meant that prices continued to rise,
even as the pace of appreciation slowed gradually in
recent months. Median prices for single-family homes
rose modestly relative to May 2022, by six percent or
less depending on the area. However, median condo
prices increased by double-digit margins in some states,
as buyers priced out of the single-family market looked
increasingly to condos. Contacts expected no meaning-
ful changes in market dynamics until interest rates de-
clined.■
For more information about District economic conditions visit:
www.bostonfed.org/regional-economy
 Federal Reserve Bank of New York
The Beige Book ■ June 2023

Summary of Economic Activity

Economic activity in the Second District stabilized in recent weeks following a period of moderate weakness. Labor
market conditions were strong, with ongoing modest employment gains and steady wage growth. Inflationary pressures
eased as both input and selling price increases slowed noticeably. Supply availability continued to improve, particularly
for manufacturers, and manufacturing activity edged slightly higher. Consumer spending grew steadily and tourism in
New York City remained strong. While housing markets were solid, exceptionally low inventory remained a challenge
and there were some signs of a pullback in demand in parts of the District. Commercial real estate markets remained
mostly unchanged, with persistently high office vacancies. Conditions in the broad finance sector continued to deterio-
rate, though at a more subdued pace than in recent months. Regional banks reported ongoing declines in loan demand,
tighter credit conditions, and narrowing loan spreads. Looking ahead, businesses expect economic conditions to im-
prove, though optimism remained muted.

Labor Markets Prices

Labor market conditions were strong, with several con-
tacts pointing to some firming in recent weeks. On bal-
ance, employment increased modestly, though there
were stronger gains reported by personal service provid-
ers and wholesalers. While firms in the construction
sector reportedly shed workers, layoffs generally re-
mained concentrated in large firms outside of the region.
A contact from the Adirondacks reported that J-1 visa
seasonal workers have arrived following a pandemic
pause, providing a much-needed seasonal boost to the
strained workforce as the tourism season gets into full
swing. Though it has become slightly easier to hire, find-
ing skilled workers remains a major challenge.
While hiring plans remained solid, a few employers point-
ed to scattered signs of easing in labor demand. Con-
tacts reported that the use of temporary workers has
declined noticeably. Further, attrition rates have contin-
ued to fall at many businesses and are in some cases
below normal levels, reducing the need to hire replace-
ments. With signs that the labor market may start to cool,
some employers are beginning to require workers to
come to the office more often. Indeed, a New York City
employment agency focused on financial services noted
that roughly half of open roles were now fully in-person.
Wage growth has remained modest and steady since the
last report. Several contacts noted that candidates’ wage
demands have become more reasonable and are now in-
line with pre-pandemic expectations.
B-1
Inflationary pressures eased noticeably in recent weeks.
Businesses reported that the pace of input price increas-
es has slowed considerably, and one construction con-
tact noted softening in the prices of inputs, such as doors
and windows. Still, the high cost of many inputs remains
a major challenge for businesses in the region. The pace
of selling price increases also moderated, especially
among goods producers and retailers, though business-
es in leisure & hospitality noted growing price pressures
in travel services and entertainment. Manufacturers
generally expect continued easing in price increases in
the months ahead, while firms in the broader service
sector anticipated more persistence.
Consumer Spending
Consumer spending grew steadily in the latest reporting
period. Consumers have continued to shift their spend-
ing away from goods toward experiences, such as travel,
entertainment, and restaurants. Indeed, amid higher
prices and changing preferences, department store
contacts reported sagging sales. Increasingly discerning
shoppers eschewed purchases of seasonal items in
favor of high-quality basics during a cool spring season,
leaving an inventory surplus of certain summer wear.
Still, auto dealers in upstate New York reported that new
car sales have been strong as pent-up demand has
been satisfied by ongoing improvements in inventory,
while used car sales remained subdued.

Manufacturing and Distribution
Manufacturing activity edged higher. Supply availability
improved, delivery times held steady, and inventories
moved lower. Businesses in transportation & warehous-
ing reported modestly increasing activity, but activity for
wholesalers was unchanged. Manufacturing and distribu-
tion firms have become more optimistic about the six-
month outlook.
Services
Service sector activity generally edged lower in the latest
reporting period, though businesses in the information
and professional services sectors reported increasing
activity. Looking ahead, businesses in the service sector
anticipated some improvement in the coming months.
Tourism activity remained strong in New York City and is
on track to reach pre-pandemic levels this summer. The
recent air quality problems from wildfire smoke had only
minor effects on tourism, with the biggest blows to out-
door attractions. The recovery of business travel has
been slower, hindered by a shift to virtual events and a
budget-driven reduction in attendance at in-person meet-
ings.
Real Estate and Construction
While the home sales market has remained solid, there
has been some cooling in parts of the District. In particu-
lar, demand softened in much of upstate New York as
discouraged buyers frustrated by low inventory increas-
ingly stepped aside. Meanwhile, home sales markets in
and around New York City remained resilient as potential
buyers were undeterred by low inventory. Home prices
were steady to up slightly; bidding wars were common
across the District, though at reduced intensity.
Residential rental markets have continued to firm, as a
strong economy and relatively high mortgage rates have
continued to boost demand by pushing some potential
homeowners into the rental market. In New York City,
vacancy rates were below historic norms and rents
reached new highs, and rents also edged up in much of
upstate New York.
Commercial real estate markets were mostly unchanged.
Office vacancy rates held steady at elevated levels
across the District and rents were mostly flat, though
some businesses reduced their footprints and opted for
higher-quality office space. Of note, the prolonged weak-
ness in office markets has begun to spillover to architec-
ture and engineering firms, who noted negative impacts
B-2
Federal Reserve Bank of New York
on business activity. New York City’s retail market was flat,
with no change in vacancy rates, rents, or leasing activity
in recent weeks. By contrast, vacancy rates remained at
low levels in the industrial market and rents trended up
modestly, except in northern New Jersey, where vacancy
rates increased somewhat.
Overall, construction contacts reported that conditions
continued to weaken since the last report. Office construc-
tion remained steady at a low level in most of the District,
though there were some new starts in northern New Jer-
sey and upstate New York. Industrial construction activity
was little changed across most of the District. Multi-family
residential starts increased in Long Island and Westches-
ter but were flat elsewhere.
Banking and Finance
Conditions in the broad finance sector continued to deteri-
orate, though at a more subdued pace than in recent
months. Small to medium-sized banks in the District re-
ported ongoing declines in loan demand across all loan
segments. Credit standards continued to tighten for all loan
types, loan spreads narrowed, and deposit rates moved
higher. Delinquency rates edged up. Contacts cautioned
that the average loan-to-value ratio on outstanding used
car loans has risen to about 120 percent, presenting po-
tential risks to the auto finance market.
Community Perspectives
Contacts noted that shortfalls in community services are
worsening food insecurity, homelessness, and public
safety. Community leaders expressed concerns about the
inadequacy of the region’s mental health care system.
Contacts expressed the need for supportive housing units
that are integrated with social services and medical sup-
port for addiction treatment and mental health care. Non-
profits reported working with hospitals that own large real
estate portfolios to develop sites for middle-income and
supportive housing, though elevated construction costs
and strained supply chains have hindered progress on this
front. ■
For more information about District economic conditions visit:
https://www.newyorkfed.org/regional-economy
 Federal Reserve Bank of Philadelphia
The Beige Book ■ June 2023

Summary of Economic Activity

On balance, business activity in the Third District continued to decline slightly. Consumer demand appeared to tick down
as contacts detailed more cautious spending habits by consumers, including fewer visits and smaller purchases. High
interest rates are continuing to limit listings of existing homes for sale, which has helped new home builders. Employ-
ment fell slightly despite improving labor availability. Wages and prices continued to grow at a modest pace. Firms also
continued to indicate that wage and price pressures were subsiding. Overall, contacts reported relatively few supply
chain disruptions – instead noting that the costs of many of their supplies had stabilized. Contacts continued to note
tighter credit standards, although credit quality remained good. On balance, expectations for economic growth over the
next six months remained subdued, as both manufacturing and nonmanufacturing firms expected slight growth.

Labor Markets across sectors indicated that year-over-year wage in-

Employment appeared to decline slightly after rising
slightly during the prior period. Although contacts noted
relatively few cases of broad-based layoffs, they detailed
targeted layoffs, more selective hiring practices, and fewer
hours for employees. Of the firms looking to hire, most re-
ported that hiring continued to be easier as labor availabil-
ity improved. However, firms noted that shortages re-
mained for certain positions, especially housekeeping
staff and cooks in the leisure and hospitality industry and
skilled trade workers in the construction and manufactur-
ing industries.
In our monthly surveys, nonmanufacturing firms reported
decreases in both full-time and part-time employment.
The index for full-time employment in the
nonmanufacturing sector turned negative and fell to its
lowest level since June 2020. The share of
nonmanufacturing firms that re-ported a decrease in the
number of full-time jobs rose to over 25 percent.
Manufacturing firms reported mostly steady levels of
employment as nearly three-quarters of the firms reported
no change in jobs. Staffing firms con-firmed that the
demand for labor declined from the prior period and that
clients were no longer looking to immedi-ately fill all open
positions.
Firms reported that wage inflation continued at a modest
pace overall but is slowly subsiding. Multiple contacts
creases were back to pre-pandemic levels. Construction
and manufacturing contacts noted wage pressures had
not eased as much for specialty trades.
In our monthly surveys, the distribution of nonmanufactur-
ing firms reporting higher or lower wage and benefit costs
per employee was typical of the pre-pandemic era, when
modest wage growth prevailed.
Prices
On balance, firms reported that prices continued to rise
modestly; however, they noted that the rate of price in-
creases appears to be slowly abating. Contacts
continued to report fewer supply chain disruptions but
indicated that their firms were trying to maintain high
profit margins for as long as possible.
In our monthly surveys, reported increases in prices paid
and received were significantly less widespread than one
year ago and were well below their historical averages.
The prices paid and prices received indexes declined for
nonmanufacturers, with the prices received index turning
negative. Among manufacturers, the prices paid index
was little changed, and the prices received index rose.
The indexes for future prices paid and future prices re-
ceived continued to suggest that firms expect price in-
creases over the next six months. However, both indexes
edged lower and were below their long-run averages.

C-1

Manufacturing
Manufacturing activity continued to decline modestly in the
current period. The index for new orders was little
changed from the last period and was negative for the
13th consecutive month. The shipments index rose for the
third consecutive month and turned positive for the first
time since February.
Despite the decline in manufacturing activity from the prior
period, nearly half of the firms estimated increased total
production growth for the second quarter of 2023 com-
pared with the first quarter. Most firms reported labor sup-
ply and supply chains as slight or moderate constraints to
capacity utilization.
Expectations among manufacturers for growth in the next
six months rose but remained tempered compared with
historical averages. The indexes for future activity and fu-
ture new orders turned positive, and the index for future
shipments also rose. All three indexes improved to their
highest level in over a year.
Consumer Spending
On balance, consumer spending declined slightly in the
current period – after holding steady, at best, in the prior
period. Contacts indicated consumers became more care-
ful in their spending. One retail contact reported a decline
in the volume of goods sold but noted that year-over-year
sales figures were buoyed by higher prices than last year.
Auto dealers reported little change in sales from the prior
period despite the continued growth of car inventories.
Contacts reported that rising affordability concerns ap-
peared to weigh on demand, keeping year-to-date auto
sales in line with last year when sales were constrained by
low inventories. Softening demand led some dealers to
decrease prices and most dealers to increase incentives.
Tourism contacts continued to report slight growth – not-
ing that the recovery was slowing. Business travel contin-
ued to recover, but leisure travel was flattening. Multiple
contacts reported that the amount of money guests spend
at their leisure destinations declined modestly in recent
months. Despite the slowing recovery in tourism in the re-
gion overall, one contact highlighted that May was the
strongest month for hotel revenue in Philadelphia since
the onset of the pandemic, in large part due to an influx of
guests for the Taylor Swift concerts in the city.
Nonfinancial Services
On balance, nonmanufacturing activity continued to de-
cline modestly. However, the decline appeared more
widespread than in the prior period. The indexes for new
orders and sales both turned negative, as the share of
C-2
Federal Reserve Bank of Philadelphia
firms reporting decreases exceeded the share reporting
increases for both categories. Expectations for growth
over the next six months remained subdued.
Financial Services
The volume of bank lending (excluding credit cards) grew
modestly during the period (not seasonally adjusted) –
slower than the moderate growth observed in both the
prior period and the same period last year.
During the period, District banks reported strong growth in
home mortgages and moderate growth in auto loans,
other consumer lending, and commercial real estate
loans. Home equity loans were flat. Credit card volumes
grew at a moderate to strong pace after rising modestly
last period, but the growth was slower than during the
same period last year.
Banks reported a moderate decline in commercial and in-
dustrial loan volumes after strong growth in the prior pe-
riod. Most contacts continued to report tightening credit
conditions following recent bank failures and described an
environment of elevated caution in which most banks want
to extend credit only to customers with whom they already
have a relationship. Contacts also continued to report
good credit quality.
Real Estate and Construction
Real estate brokers reported that inventories of existing
homes for sale remained very low because homeowners
have been reluctant to give up their low mortgage rates.
Existing-home sales rose slightly in the current period but
remained well below the sales observed in prior years dur-
ing the normally busy spring housing market. Homebuild-
ers once again described their modest sales as better
than expected, and noted the industry continued to benefit
from the dynamics of the existing-home market.
Housing affordability remained low, and rents remained
high in the current period. Requests for assistance with
housing and utility bills rose slightly and continued to dom-
inate the share of 211 requests in New Jersey and Penn-
sylvania. Over 30 percent of all requests in the two states
were related to housing, while 28 percent of the requests
involved utility bills.
According to contacts, construction activity for commercial
real estate held steady, but financing conditions for new
projects became more difficult. Leasing activity continued
to fall moderately as weakness in the office market contin-
ued to materialize. ■
For more information about District economic conditions visit:
www.philadelphiafed.org/regional-economy
 Federal Reserve Bank of Cleveland
The Beige Book ■ June 2023

Summary of Economic Activity

Overall, Fourth District business activity changed little since the prior reporting period. While consumer spending on
services remained solid, higher interest rates continued to constrain households’ big-ticket purchases. Meanwhile, sev-
eral contacts suggested that higher interest rates led many businesses to delay projects. Accordingly, bankers reported
lower loan volumes for both household and business loans. Manufacturers reported little growth in orders, but many
continued to work through solid backlogs. Contacts have recently become more optimistic about the near-term outlook
for their firms, and many have lowered their expectations for a US recession in 2023. Still, uncertainty remained elevat-
ed and was likely reflected in cautious capital spending plans and slower employment growth. Wage pressures contin-
ued to ease somewhat as labor demand lessened and labor availability improved for many firms. Input cost pressures
also eased, and the share of firms reporting increased selling prices dipped to its lowest level since late 2020.

Labor Markets were rising. On balance, these contacts suggested that

Contact reports suggested modest employment growth
in the Fourth District during the most recent reporting
period, with demand for labor varying by industry seg-
ment. Demand was particularly strong among manufac-
turers that continued to report solid backlogs for their
goods. Still, a few manufacturers (and contacts in other
industries) reported that they were only hiring to fill key
production positions while leaving others unfilled (such
as those in support). The hesitance to fill support roles
was mainly a function of general economic uncertainty
or expectations for weaker demand for goods and ser-
vices.
On balance, wage pressures eased slightly during this
reporting period, with the share of contacts holding
wages steady (67 percent) at its highest in more than
two years. Some bankers, transportation firms, and
restauranteurs reported that they did not need to in-
crease wages because workers were more readily avail-
able. By contrast, several manufacturing and construc-
tion firms reported that wage pressures remained high
amid continued difficulty filling key openings.
Prices
Nonlabor input costs pressures eased since the previ-
ous report. About a third of contacts said that costs had
increased in the prior two months, the smallest share
since September 2020. Construction contacts noted that
steel and lumber prices were falling but concrete prices
D-1
costs were “stabilizing.” Manufacturers reported mean-
ingful relief from input cost increases, as well, with one
plastics manufacturer stating that suppliers were raising
prices less often and by a smaller percentage than in the
past. Looking forward, contacts expected further relief
from nonlabor input cost pressures.
Price pressures eased, as well. Less than 40 percent of
firms recently raised selling prices, the lowest share
recorded since the end of 2020. Several goods produc-
ers raised prices to maintain margins or to “catch up” to
past cost increases. However, many also said they did
so cautiously. One manufacturer said it couldn’t raise
prices “without hurting demand or damaging customer
relationships.” Similarly, a logistics contact noted that
customers were increasingly resistant to any price in-
creases and that freight prices fell further. Consumer
prices continued to increase on balance, but one dis-
count retailer said that its prices eased somewhat as it
passed along “the disinflation…seen from some suppli-
ers.”
Consumer Spending
Consumer spending was mostly unchanged. Warmer
weather and resilient consumers bolstered sales for
restauranteurs and some non-auto retailers. Still, one
large general merchandiser noted that household budg-
ets had tightened because of reduced SNAP benefits
and high inflation. He added that sales for discretionary

items, such as televisions and video game systems, had
declined and that some customers had begun to choose
less expensive store-brand food items over national
brands. Some auto dealers said that sales rebounded
despite higher interest rates, while others stressed that
interest rates and elevated vehicle prices remained the
primary deterrents for potential customers. Contacts
generally expected consumer demand to hold steady in
the coming months.
Manufacturing
On balance, demand for manufactured goods was sta-
ble. Orders remained strong for aerospace-related prod-
ucts and for heavy trucks and trailers, and strengthening
international markets continued to bolster activity for
some firms. However, orders softened or remained weak
for some firms tied to consumer products as inventory
corrections continued. Steel manufacturers said that
orders were steady or slightly lower compared to those
in recent months, and industry contacts generally ex-
pected demand for their products to pick up in the sec-
ond half of July following an expected seasonal slow-
down earlier in the month. Likewise, manufacturers
across industry segments were notably optimistic and
expected demand for their products to increase in the
coming months.
Real Estate and Construction
Demand for residential construction and real estate
changed little in recent weeks. Contacts reported that
higher interest rates and elevated home prices continued
to hinder demand. One homebuilder noted, “we’re get-
ting sales, but on the slow side.” Going forward, contacts
were optimistic that demand would improve. One home-
builder noted that the limited supply of existing homes
would help to boost demand for new home construction.
Nonresidential construction and real estate activity re-
mained soft. Several general contractors indicated that
high borrowing costs were dampening demand for con-
struction, and several commercial real estate contacts
noted slowing in the commercial real estate investment
market.
Financial Services
Lenders reported weaker activity amid economic uncer-
tainty and higher interest rates. Loan demand de-
creased, with declines noted for both household and
business lending. One banker said that many business-
es were putting projects on hold because of economic
uncertainty unless the project is being subsidized by the
government. On the funding side, deposits were general-
ly flat to down as banks continued to face competition for
deposits, particularly from entities such as money market
D-2
Federal Reserve Bank of Cleveland
funds. On balance, delinquency rates remained low by
historical standards and were little changed in recent
weeks, with one lender describing the delinquency rate
environment as “benign.” Looking forward, lenders ex-
pected further declines in loan volumes and little change
in deposits.
Nonfinancial Services
Demand for nonfinancial business services generally
declined recently. Contacts in professional and business
services noted that demand had flattened. Transporta-
tion services firms reported declines in activity, in large
part because firms continued to work down inventories,
some of which had been built up as a hedge against
supply chain disruptions earlier in the recovery. Looking
forward, firms in professional and business services
generally expected demand to rebound in the months
ahead. By contrast, logistics and freight contacts antici-
pated further declines, though one freight contact was
optimistic that “the bottom is in the not-too-distant fu-
ture.”
Community Conditions
Community organizations reported a sharp increase in
the number of families seeking food assistance recently,
with one noting that it had seen a 35 percent jump since
March. Multiple contacts said that the loss of pandemic-
era Supplemental Nutrition Assistance Program (SNAP)
benefits in March, along with elevated food prices, con-
tributed to the increase. One food pantry operator said,
“people are experiencing food insecurity more now than I
have seen in my seven years with the organization.”
Some organizations were forced to limit the frequency of
visits and quantity of food provided to households, exac-
erbating the strain on struggling families. Looking for-
ward, some contacts expected food insecurity to rise
further during the summer as families whose children
received free and reduced lunches during the school
year seek additional support. ■
For more information about District economic conditions visit:
www.clevelandfed.org/en/region/regional-analysis
 Federal Reserve Bank of Richmond
The Beige Book ■ June 2023

Summary of Economic Activity

The Fifth District economy grew slightly in recent weeks. Retailers and food service companies saw steady to increasing
consumer spending, particularly for seasonal goods. Auto sales, however, were down slightly and inventory levels re-
mained very low. Travel and tourism picked up, but travel shifted more towards larger city and international travel. Nonfi-
nancial services firms reported stable demand, but some noted that clients were holding back capital due to economic
uncertainties. Manufacturing activity slowed as new orders declined. District ports echoed that sentiment and noted that
imports slowed as retailers and manufacturers still had elevated inventory levels. Loaded exports, particularly agriculture
products, remained strong. Trucking firms also reported lower freight volumes this cycle. Residential real estate condi-
tions softened as activity was still being restrained by a lack of available inventory. Commercial real estate markets were
mixed as retail and industrial segments remained strong but multifamily activity leveled off and office vacancy rates
rose. Commercial loan demand softened while consumer loan demand was little changed. Employment picked up mod-
erately and wage growth eased slightly but wage pressures remained elevated amid a continued tight labor market.
Price growth continued to ease but remained elevated compared to pre-pandemic inflation rates.

Labor Markets Manufacturing

Employment grew moderately over the most recent
reporting period. Businesses continued to face challeng-
es finding workers, but those challenges were more
isolated to specific industries and skill-levels. A software
company reported that finding IT workers at reasonable
rates has become easier. Conversely, a company that
offers tour bus vacations struggled to find drivers and
mechanical technicians, which was keeping them from
operating at a higher level. Wage growth eased some-
what but there were some reports that wage pressures
remained high. One contact, for example, reported that
they were closely monitoring inflation and trying to adjust
wages to ensure they were providing a living wage for
their staff while remaining competitive in the market.
Fifth District manufacturing firms reported some slow-
down in business activity during the most recent report-
ing period. Firms reported that rising interest rates and a
pullback in consumer spending on goods led to declines
in new orders. A dental laboratory reported not meeting
their numbers for the past six months due to a significant
slowdown in the dental market. A furniture manufacturer
reported that they were having layoffs for only the sec-
ond time in their forty-two-year history due to declining
business conditions. Several contacts reported imbal-
ances in inventory levels as finished goods inventories
were creeping upwards. This is especially true in the
retail manufacturing sector as retailers pulled back on
new orders.

Prices Ports and Transportation

Price growth continued to moderate in recent weeks,
particularly for services. According to our most recent
surveys, prices received by manufacturers declined
sharply in June, falling below four percent year-over-year
growth. Services firms also saw price growth moderate
slightly in June, but the annual growth rate remained just
above five percent. A few businesses remarked that the
increased cost of capital was driving up their expenses
and they were increasing their prices as a result. Howev-
er, some added that they were not able to push the full
cost through to customers, so margins were tightening.
E-1
Fifth District ports stated that loaded import volume was
down this period, but that volume was close to pre-
pandemic levels. Many big retailers still have elevated
inventory levels causing a decrease in imports of con-
sumer goods. However, there was a slight increase in
imports of machinery and parts. Loaded export volumes
were strong mainly driven by agricultural products and
lower value commodities. Spot prices remained low
though still slightly higher than in 2019. Container dwell
times shortened dramatically, and gate turn times were
 Federal Reserve Bank of Richmond

not an issue. In the last month, airfreight was soft com- Overall market activity in the commercial real estate
pared to recent years but still above 2019 levels and sector was mixed in the last month. Leasing remained
was driven primarily by imports as exports were down strong for retail and industrial properties with rents esca-
drastically. lating this period. In the office market, vacancy rates and
space available for sublease increased due to compa-
Trucking firms reported that shipping demand remained
nies downsizing. Rental rates in the office segment
soft this period as customers were still dealing with
remained flat; however, landlords were offering more
elevated inventories and reduced orders. However, food
discounts and/or concessions to potential credit tenants.
and pharmaceuticals shipping volumes were holding up
In multifamily, lease rates were starting to flatten out.
well. Spot shipping rates were at low levels as there was
Respondents stated that tighter credit availability was
a lot of excess capacity in the truck load segment. How-
starting to negatively impact investments into new pro-
ever, respondents indicated that they were able to get
jects. Commercial contractors noted a continued lack of
moderate increases with their contract rates despite
skilled labor, and also that the amount of work out to bid
customers being very price sensitive. Companies stated
has slowed substantially.
that drivers were more readily available. Trucking firms
also remarked that the higher labor costs, as well as Banking and Finance
dramatically higher costs of parts and new equipment, Loan demand slowed slightly across most loan types,
were impacting profitability. most notably in the commercial real estate and business
loan portfolios. This slowing of demand continued to be
Retail, Travel, and Tourism
attributed to rising interest rates and uncertain economic
Retailers reported steady to modest growth in sales in
conditions. Consumer loan demand remained stable,
recent weeks. Several of the businesses that saw in-
with home equity loans showing moderate growth. Some
creased sales noted that it was partly due to typical
banks reported declines in deposits as customers moved
seasonal patterns as they were geared towards summer
funds to higher yield products. Institutions also noted a
shopping. Restaurants and novelty food services report-
slight degrading of borrower’s credit quality due to their
ed strong sales and steady demand. Auto sales, on the
increased costs of conducting business. Loan delinquen-
other hand, declined slightly and dealers commented
cy rates remain stable, but institutions have been closely
that limited inventory and elevated interest rates were
monitoring their portfolios.
impeding sales volumes.
Travel and tourism increased slightly, on balance, but Nonfinancial Services
several contacts saw some shifts in consumer behavior. Nonfinancial service providers continued to report that
For example, travel picked up in Baltimore and Wash- demand for their services as well as revenues had re-
ington, D.C. while coastal areas of the district reported mained stable. One respondent noted they felt demand
slightly lower occupancy and revenues in recent months; was still being driven by a pent-up demand for commer-
however, the expectation was for beach travel to pick up cial printing services held over from Covid. Others noted
going into the summer months. An airport contact said that they have observed more clients preserving capital
that consumer travel was steady and saw more people in anticipation of economic uncertainty. Labor shortages
taking international flights than in recent years. have begun to ease in certain industries, but wage pres-
sures remained high. Respondents also noted a re-
Real Estate and Construction newed focus on expense control at all levels of their
Residential real estate respondents indicated that the businesses in light of higher wages, higher interest
inventory of homes for sale remained constrained with costs, and economic uncertainty. ■
contract prices continuing to appreciate slightly. Overall,
the number of sales decreased primarily due to the low
housing inventory as well as the usual seasonal slow-
down. In the last month, buyer traffic was steady and
days on market continued to be low. Prospective buyers
were not having any difficulties obtaining mortgages but
there were some issues with appraisals not coming in at
the escalated sales price. Residential construction firms
noted a decrease in demand for their services as home-
owners were less willing to plan for large remodeling or
constructions projects. For more information about District economic conditions visit:
www.richmondfed.org/research/data_analysis

E-2
 Federal Reserve Bank of Atlanta
The Beige Book ■ June 2023

Summary of Economic Activity

The Sixth District economy grew at a measured pace from mid-May through June. Labor availability and retention im-
proved, and wage pressures eased. On balance, nonlabor costs continued to moderate and pricing power was mixed.
Retail sales softened for discretionary items, but consumer spending on essentials remained solid. Auto sales were
strong. Domestic leisure travel declined while business and international travel rose; cruise demand was robust. Hous-
ing demand remained durable; home inventories fell, and house prices rose. Commercial real estate conditions were
mixed. Transportation activity slowed. Manufacturing experienced strong demand. Loan volume continued to rise, but
deposit growth slowed. Activity in the energy sector was stable. Agriculture demand slowed.

Labor Markets year-ahead inflation expectations also decreased in June

The majority of Sixth District contacts reported that labor to 2.7 percent, on average, from 2.9 percent in May.
availability and retention improved, and most firms con- Consumer Spending and Tourism
tinued to hire. However, challenges filling corporate
Retailers described consumers as more value conscious
roles, skilled construction, and healthcare positions were
since the previous report. Discretionary spending on
noted while, for some firms, entry-level hourly service
items such as clothing, electronics, and recreation has
roles were easier to fill. A number of manufacturers
moderated amid a behavior shift to fewer store visits and
remained extremely short-staffed and utilized overtime to
less impulse buying. However, spending on food and
run at capacity, while other manufacturing firms reported
beverages, household essentials and healthcare neces-
stabilized employment levels and reduced overtime to
sities rose. Retailers expect that demand will stabilize in
align with softer demand. Among those firms experienc-
the second half of 2023. Automobile dealers reported
ing weaker demand, most remained reluctant to lay off
that sales remained resilient, although consumers have
staff that they had endeavored to attract and retain, but
begun to trade down to lower price-point models.
several slowed the pace of hiring except for exceptional
candidates or relied on attrition to shrink their workforce. Tourism and hospitality contacts reported further soften-
ing demand for domestic leisure travel, while internation-
Overall, wage growth remained higher than pre-
al, group, and business travel strengthened year over
pandemic levels. Most contacts reported that wage
year. Hotel occupancy across most destination beach
pressures continued to ease, and the majority said the
resorts fell since the previous report and those hoteliers
pace of increases had begun to moderate, in line with
reported some diminished pricing power. Demand for
expectations.
cruise travel and on-board spending remained robust.
Prices Construction and Real Estate
Nonlabor costs continued to stabilize over the reporting
Housing demand remained strong throughout the District
period. However, several Florida contacts noted signifi-
amid declining existing home inventories. Home sales in
cant increases in insurance costs. The cost of food
many metro areas rose to near seasonal norms, creating
products moderated, aided by decreases in freight and
persistent supply shortages. Home prices experienced
overland delivery costs. Construction input costs also
steady upward pressure on a monthly basis as a result
declined, with commodities like steel and lumber falling
of low supply. Limited existing home inventories drove
to or near pre-pandemic levels. While wholesalers in-
demand for new home construction. Though down from
creasingly reported pushback from clients on price in-
last year, the share of builders offering incentives to
creases, consumer prices remained elevated as retailers
attract homebuyers, such as interest rate buydowns,
saw minimal impact to demand. The Atlanta Fed’s Busi-
remained high. Home ownership affordability throughout
ness Inflation Expectations survey showed year-over-
most markets in the District worsened as home prices
year unit cost growth was 3.1 percent, on average, in
and mortgage rates trended higher.
June, down significantly from 3.5 percent in May. Firms'
F-1

Contacts reported mixed conditions in the commercial
real estate (CRE) sector. While modestly decelerating,
general retail and industrial activity remained at healthy
levels. The multifamily sector cooled as demand for
luxury/higher-priced units deteriorated. While declining
overall, office sector conditions were mixed; activity in
newer buildings was solid, while occupancy in older
buildings declined as tenants vacated to newer struc-
tures. Additionally, some older buildings have incurred
sizeable declines in value. More contacts reported con-
cerns regarding financing, as some banks heightened
underwriting standards and reduced funding commit-
ments. Contacts also noted more uncertainty amid de-
clining CRE values.
Transportation
Transportation activity slowed further over the reporting
period. Ocean carriers and ports reported declines in
container traffic, owing to inventory destocking by retail-
ers and weaker global demand. District railroads report-
ed significant decreases in year-over-year freight vol-
umes, including double-digit decreases in intermodal
shipments. Logistics firms reported revenues from ware-
housing were flat compared with 2022; higher prices
helped to offset volume declines.
Federal Reserve Bank of Atlanta
or up over the reporting period. While oil and gas pro-
duction continued, regional output was generally un-
changed. Refiners described high utilization to meet
summer demand for gasoline. Chemical producers noted
strong demand for products that support the renewables
sector, which continued to experience considerable
growth in the manufacturing of batteries, solar cells,
turbines, renewable fuels, and more. Utility providers
reported commercial segment growth across the District,
although industrial segment growth was concentrated in
regions that experienced gains from commodity produc-
tion.
Agriculture
Agricultural conditions were soft over the reporting peri-
od. Oversupplies of cheese kept demand for milk low.
With fewer avian flu outbreaks, chicken exports in-
creased somewhat, but overall demand for chicken
remained down. Citrus growers experienced good re-
turns on sales but weak profits because of low yields.
Row crops were generally healthy, although severe
storms damaged crops in some parts of Mississippi and
Alabama. Demand for cotton continued to fall. The cattle
market remained strong as demand for beef remained
high amid low supply.■

Manufacturing
Many manufacturers reported healthy business condi-
tions over the reporting period. Some contacts noted a
slight decrease in demand, which many characterized as
a normalization, and most firms reported robust pipelines
of orders. While lead times and availability of many
inputs have improved, firms noted lingering shortages of
some inputs, particularly electrical switchgears. Auto
manufacturers saw strong demand but noted signs of
trade-downs to less expensive vehicles and expect to
see some slowing in the coming months.

Banking and Finance

On balance, growth slowed at District financial institu-
tions, led by a slight decline in the deposit base in recent
months as interest rate increases continued to encour-
age customers to move deposits into higher-yielding
alternatives. To help offset slowing deposit growth on a
year-over-year basis, institutions steadily increased
interest rates on deposits. Institutions reported continued
loan growth, primarily residential, construction, and
development, which was offset by a decline in securities
portfolios. Many of the financial institutions have yet to
report significant increases in delinquencies, though
performance varied widely. Contacts expect asset quality
to normalize over the coming quarters.

Energy For more information about District economic conditions visit:

Contacts reported that most energy segments were flat www.frbatlanta.org/economy-matters/regional-economics
F-2
 Federal Reserve Bank of Chicago
The Beige Book ■ June 2023

Summary of Economic Activity

Economic activity in the Seventh District was little changed overall in late May and June. Contacts generally expected a
small decline in demand over the next year and many expressed concerns about the potential for a recession. Employ-
ment increased moderately; nonbusiness contacts saw little change in activity; consumer spending was flat; business
spending and construction and real estate activity declined slightly; and manufacturing decreased modestly. Prices and
wages rose moderately, while financial conditions tightened slightly further. Expectations for farm incomes in 2023
decreased some.

Labor Markets Consumer Spending

Employment rose moderately in late May and June and
contacts expected a similar rate of increase over the
next 12 months. Many contacts continued to have diffi-
culty finding workers, particularly higher skilled labor,
though many also said that hiring had become easier,
and several noted they were fully staffed. One program
administrator observed that some manufacturers were
managing changing labor needs by briefly laying off
workers and then rehiring them, sometimes repeatedly.
Wage and benefit costs rose moderately. A few contacts
noted wage increases in the 3 to 5 percent range in
recent labor union contract agreements. Some indicated
healthcare costs had risen significantly.
Prices
Prices rose moderately over the reporting period and
contacts expected a similar rate of increase over the
next 12 months. Nonlabor costs were up modestly, with
rising raw materials and energy costs contributing to the
increase. Contacts continued to note that growth in
shipping costs had slowed noticeably. One contact in
finance reported improved margins for his manufacturing
clients, who saw input costs come down but were able to
maintain higher selling prices. Consumer prices general-
ly increased moderately due to the continued elevated
level of demand and the passthrough of higher costs.
Consumer spending was little changed in late May and
June. Nonauto retail spending was flat overall, with
contacts highlighting increased sales of furniture and
lawn and garden products but declining sales at conven-
ience stores and in the electronics and building materials
segments. Spending further shifted toward essential
items and away from discretionary ones, and for many
products, consumers continued to trade down in quality
or convenience. Light vehicle sales were unchanged but
at a higher level than had been expected earlier in the
year. Leisure and hospitality spending was also flat but
at a strong level, with contacts reporting a small increase
in spending at amusement parks and tourist attractions
but less air travel. Contacts indicated that consumers
were less likely to trade down in their leisure and hospi-
tality purchases compared with other spending catego-
ries.
Business Spending
Business spending declined slightly in late May and
June. Capital expenditures were unchanged on balance,
with several contacts reporting purchases of new equip-
ment or software. Freight volumes declined further.
Demand for industrial, commercial, and residential ener-
gy increased slightly. Inventories for most retailers were
a little higher than desired, with one contact noting ele-

G-1
 Federal Reserve Bank of Chicago

vated stocks of apparel, beauty items, and sporting and Agriculture

outdoor goods. Auto inventories rose slightly but re-
mained below pre-pandemic levels, with contacts noting
that railcar shortages were slowing deliveries of vehicles
to dealers. In manufacturing, inventories increased mod-
estly, and contacts said that supply chain issues, while
still arising at times, had returned to pre-pandemic
norms.
Construction and Real Estate
Construction and real estate activity decreased slightly
over the reporting period. Residential construction ticked
down, reflecting a slowdown in single-family develop-
ment. New home sales decreased slightly, while new
home prices increased slightly. Residential real estate
activity was little changed. An Iowa contact said that
cash transactions continued to be a larger proportion of
sales than they have been historically as high interest
rates were pushing borrowers out of the market. Existing
home prices were down some, while rents were flat.
Nonresidential construction activity slowed overall as
high interest rates, elevated cost pressures, and shortag-
es of key inputs such as electrical components weighed
on activity. Nonresidential construction prices remained
at elevated levels. Commercial real estate activity de-
creased modestly. Prices decreased slightly, rents fell
modestly, and vacancy rates were up slightly.
Manufacturing
Manufacturing demand decreased modestly in late May
and June and backlogs were down moderately. Steel
orders were up slightly, supported by solid demand from
the auto and construction industries. Fabricated metals
orders decreased slightly, in part due to weaker demand
in the aerospace sector. Machinery sales also decreased
slightly, with contacts highlighting less demand from the
auto industry. In contrast, auto industry contacts said
production was steady on balance. Heavy truck orders
increased slightly amidst very low inventories.
Expectations for Seventh District farm incomes for 2023
deteriorated some as drought expanded throughout the
District. One contact said, “It is time to be concerned, but
too soon to panic.” Crops were behind normal growing
progress. Expectations for this year’s corn crop wors-
ened more than for soybeans because corn is more
sensitive to drought at this growth stage. Crop prices
were volatile during the reporting period; while corn
prices ended down, soybean prices were up, and wheat
prices were about the same. Some input costs were
lower. Prices for milk were down once again, extending
losses for dairy farms. Although hog prices moved up
some, producers continued to struggle to turn a profit.
Egg prices edged up. Cattle prices made further gains,
as drought limited water and forage availability, forcing
farmers to trim their herd sizes.
Community Conditions
Community, nonprofit, and small business support con-
tacts reported little change in activity, which was at a
robust level. That said, there were signs the economy
was cooling. State government officials saw slowing
growth in tax revenues and a small increase in demand
for unemployment insurance. High interest rates were
challenging Community Development Finance Institu-
tions’ efforts to lend at affordable rates to low- and mod-
erate-income borrowers, including small businesses and
prospective homeowners. Contacts offering small busi-
ness services, in particular to small manufacturers, re-
ported that a lack of workers remained an important
issue and was holding back production. At the same
time, contacts engaged with low wage workers stressed
that wages were too low to meet daily needs in the face
of rising costs, particularly for housing. ■

Banking and Finance

Financial conditions tightened slightly further on balance
during the reporting period. Bond and equity market
values edged up, while volatility edged down. Business
loan demand decreased modestly, as borrowing rates
rose and standards tightened some. One contact said
weak demand was concentrated among clients in the
consumer discretionary, durable goods, and retail sec-
tors, which were seeing slowing sales. Business loan
quality deteriorated a bit. Consumer loan demand de-
creased slightly overall, but several contacts noted great-
er credit card usage. Consumer loan quality decreased
slightly, while borrowing rates rose modestly and lending For more information about District economic conditions visit:
standards were somewhat tighter. chicagofed.org/cfsec

G-2
 Federal Reserve Bank of St. Louis
The Beige Book ■ June 2023

Summary of Economic Activity

Economic conditions have remained unchanged since our previous report. Although employers reported better employ-
ee retention, they continued to have difficulties finding workers, especially skilled ones. Wage pressures lessened slight-
ly. Consumer spending was largely steady, though contacts reported a shift away from discretionary goods and declin-
ing demand for big-ticket purchases that require financing. The residential real estate sector saw activity increase, but
the commercial real estate sector reported worsening conditions at non-premium office and retail spaces. Banking con-
tacts reported moderate declines in loan demand and compressed net interest margins. Agriculture conditions declined
moderately, and contacts expressed concern about commodity prices falling while input costs remain high. The overall
outlook remains pessimistic but has improved slightly.

Labor Markets Prices

Employment has remained unchanged since our previ-
ous report. Employers continue to report tight labor
markets. Unemployment rates remain low and hiring
workers has remained a burden for several industries.
Many contacts have reported using technology improve-
ments to deal with labor shortages. A healthcare contact
in Little Rock reported they have begun to examine how
AI can help with paperwork to offset persistent labor
shortages. A Louisville transportation contact noted that
while companies are still competing for workers, there is
less job switching than in previous months. A northwest
Arkansas food service company reported receiving
unsolicited resumes which hadn’t happened in “quite
some time.”
Wages have grown slightly since our previous report.
Most contacts across the region reported either slight or
no wage increases. Retail contacts in Little Rock have
reported increasing their minimum wages in the past
month to help fill labor shortages. A workforce contact
noted that wage growth is still strong in construction
trades due to high demand and a shortage of skilled
workers.
Prices have increased modestly since our previous
report. Although respondents’ plans for future price
increases varied, two comments were consistent. First,
nearly all respondents reported higher labor costs. Sec-
ond, many contacts reported an inability to fully pass on
increased costs to consumers, which has compressed
margins. A contact in the grocery industry reported that
they would pass about 25-33% of higher costs to con-
sumers. The same contact reported decreasing consum-
er demand and increasing consumer price sensitivity. A
contact in the car industry plans to increase prices, but at
a slower rate than before in order to maintain competi-
tion in the market. Other contacts reported little to no
increase in non-labor cost pressures. A contact in the
furniture industry reported that prices may decrease in
the future after recouping previous losses from excess
freight costs.
Consumer Spending
District general retailers, auto dealers, and hospitality
contacts reported mixed business activity and a slightly
negative outlook. Retailers in St. Louis noted that busi-
ness activity was mixed over the past month, and they
are expecting interest rates to be a primary factor affect-
ing consumer demand over the next quarter. An Arkan-
sas retailer noted that profit margins had fallen in recent

H-1

weeks due to consumers spending more on grocery
essentials and less on higher-margin merchandise. A
Little Rock auto dealer reported that business activity
was down slightly as bank financing continues to tighten.
An Arkansas contact reported that sales of high-end
boats are steady and low-end boats are down slightly,
but sales for middle-market boats have collapsed. Res-
taurants in Memphis expressed concern that crime might
lead to faltering consumer demand. District hospitality
contacts noted mixed business activity over the past
month but expect to have a typical busy summer.
Manufacturing
Manufacturing activity has increased slightly since our
previous report. Firms in Missouri and Arkansas have
reported slight upticks in new orders and production.
Congestion with supply chains and transportation contin-
ues to ease, while production schedules also remain
steady. A new glass bottle manufacturing facility broke
ground in Bowling Green, Kentucky, creating 140 new
jobs and a capital investment of $240 million. Two furni-
ture manufacturers in Lee County, Tennessee, added
130 new employees, with an increased payroll of $4.5
million. Firms remain optimistic that demand will remain
consistent at least in the near term.
Nonfinancial Services
Conditions in the nonfinancial services sector have been
largely unchanged since our previous report. Air traffic
rose slightly across the District. Contacts reported that
labor shortages have constrained public transit in St.
Louis, leading workers to look for alternative transporta-
tion options. A Louisville contact reported continually
improving conditions in the transportation sector. Little
Rock contacts reported that rising healthcare costs and
labor shortages have put a strain on the industry. The
Little Rock bicycling industry has seen significant growth
in recent quarters, generating more than $150 million in
total economic impact from jobs to tourism to taxes. A St.
Louis workforce contact reported an increase in informal
childcare providers offering small-scale services.
Real Estate and Construction
Residential real estate has seen slightly increased activi-
ty since our previous report. Median sale prices for resi-
dential real estate in the Little Rock, Louisville, and
Memphis MSAs rose slightly in May, while median sale
prices remained unchanged in the St. Louis MSA. Inven-
tory dropped slightly in the Little Rock, Louisville, and
Memphis MSAs in the past month. In the Louisville and
Memphis MSAs, pending sales have jumped by 20%
since our previous report. In the four major District
MSAs, rental rates for residential real estate have seen
small increases since our previous report. A northwest
H-2
Federal Reserve Bank of St. Louis
Arkansas contact noted that home price growth has
decelerated in recent weeks.
Memphis-area real estate and construction contacts
reported spillover effects from a major EV manufacturing
project. Public construction elsewhere in the District has
remained busy since our previous report, while private
projects are starting to press pause for the moment. A
Louisville commercial construction contact reported
having 12-18 months of existing projects to complete but
that some are aging out or being put on hold due to
increased costs. A Louisville commercial real estate
contact reported a trend of tenants moving from class “B”
office spaces to class “A” spaces at reduced rates and
noted that this shows no signs of slowing down in the
future.
Banking and Finance
Banking conditions in the District have remained stable
since our previous report, even as lending activity contin-
ues to soften. Year-over-year loan volume declined
moderately. Contacts reported that small business lend-
ing in particular has been slow, due to higher interest
rates. Total deposits growth, on the other hand, has
seen a strong increase since the past quarter. Rising
deposit interest rates continue to create a very competi-
tive market for deposits, which is compressing net inter-
est margins. Customer concerns regarding deposit safe-
ty remain relatively low in the aftermath of the Silicon
Valley Bank and Signature Bank failures. Although delin-
quency rates have continued to rise toward pre-
pandemic levels, contacts maintain a positive near-term
outlook on credit quality. A retailer reported that credit
card usage has risen sharply over the past few months,
bringing credit utilization to its highest levels since 2019.
Agriculture and Natural Resources
District agriculture conditions declined moderately rela-
tive to the previous reporting period. Between the end of
May and end of June, the percentages of corn, cotton,
rice, and soybeans rated fair or better saw slight to mod-
erate decreases across the board. Compared with this
time last year, overall crop conditions have declined
moderately. Crop conditions both began lower and de-
creased more over the period when compared with this
time last year. With the exception of cotton, which in-
creased modestly, all other individual crop conditions
were worse compared with last year. Contacts in the
Little Rock region reported some anxiety about the expir-
ing farm bill later this year. While commodity prices
remain high generally, some have begun retreating while
input and fuel costs remain high, leading to profitability
concerns as we enter the second half of the year. ■
 Federal Reserve Bank of Minneapolis
The Beige Book ■ June 2023

Summary of Economic Activity

Economic activity in the Ninth District increased slightly since the previous report. Employment grew moderately, helped
by summer demand. Wage pressures remained moderate, while price pressures were mild. Growth was noted in ser-
vices, commercial construction, and manufacturing, while consumer spending was flat. Residential construction and real
estate activity remained low, and agriculture weakened due to drought conditions. Energy exploration also fell slightly.
Minority- and women-owned businesses reported steady activity and a positive outlook.

Labor Markets Prices

Employment grew moderately since the last report.
Labor demand remained high overall, in part because of
normal seasonal increases, according to internal surveys
and most contacts. Labor availability remained tight, but
improved according to some contacts, which had
upsides for both employers and workers. A Minneapolis
workforce development contact noted an increase in
layoffs, but so far they “haven’t seen these layoffs turn
into dislocated workers” because the workers “are doing
OK finding new jobs on their own.” Employers also
continued adjusting their business and labor models. A
restaurant in central Minnesota reported that it bought an
apartment building to provide workers with nearby
housing. A North Dakota staffing firm noted that demand
for contingent work had fallen because “most clients just
want full-time help,” and available workers preferred full-
time jobs to temporary work. Counter-intuitively, he said,
“if the economy softens, we expect demand for temp
staffing assignments to increase.”
Wage pressures were moderate overall. A monthly
survey of District firms showed persistent but moderate
wage pressures. In Montana, temp jobs in office support
and transportation have seen significant wage increases
so far this year, while wages for construction and
manufacturing temp jobs have been flat. A Minneapolis
tech staffing firm reported that technical positions have
“completely reversed” from a candidate market to a client
market, with job seekers “jumping at the first offer.”
Price pressures were mild overall since the previous
report. Half of firms responding to the Minneapolis Fed’s
annual professional services survey reported that the
prices they charged to customers had increased from a
year ago, and nearly two-thirds said their nonlabor input
costs increased. Manufacturing and other contacts
reported that freight rates had declined substantially from
a year ago. “It feels like our vendors are squeezing the
last increases out of us,” said a manufacturer. Retail fuel
prices in District states were little changed since the
previous report. Prices received by farmers increased in
May from a year earlier for barley, chickpeas, potatoes,
hay, cattle, and turkeys; prices decreased from a year
earlier for corn, wheat, soybeans, milk, hogs, chickens,
eggs, dry edible beans, lentils, and canola.
Worker Experience
Most workers who responded to a recent Minneapolis
Fed survey reported job stability. About a fifth were
looking for a different job in hopes of increased income
but were facing difficulties in hearing back from
employers or finding a job that paid enough. A few
professional workers in the Minneapolis-St. Paul area
said they were considering a temporary move out of
state to work remotely while their company's work-from-
home flexibility was still in place. According to a
Minnesota union contact, recently certified nursing
assistants were choosing to work in retail instead of
health care, where wages were similar but stress was

I-1

much higher. A significant number of nurses were
reportedly pulling back from traveling jobs as federal
funding abated, and some hospitals offered up to
$15,000 after taxes for an 18-month commitment to
permanent positions.
Consumer Spending
Consumer spending was flat overall since the last report.
Gross sales in South Dakota and Wisconsin have
softened for several consecutive months year over year,
and retail contacts have also reported lower sales.
Tourism contacts were generally upbeat about overall
activity levels but noted some pullback in travelers’
average spending. Accommodations and lodging tax
collections in Montana remained strong, and lodging
sources reported strong bookings for the summer. Airline
travel has continued to grow, though monthly increases
have moderated a bit at some airports after steady
double-digit gains. Recent new-vehicle sales have
increased notably at some dealerships, thanks to
stronger inventory from vehicle makers. Used car sales,
however, have fallen. Sales of recreational and
powersport vehicles improved with warmer weather but
remained soft year over year.
Services
Activity in the professional services sector increased
modestly. Respondents to the annual services survey
reported increased sales and productivity over last year,
while profits declined slightly. Firms’ expectations were
mildly positive for the coming 12 months.
Construction and Real Estate
Construction activity was slightly higher since the last
report. Construction firms overall reported growth in
recent revenues, with expectations of further growth this
summer. Industry data and contacts suggested that
infrastructure and energy sectors were seeing stronger
activity than other subsectors. But inflated material costs
continue to be a drag. A pavement source in Minnesota
noted that the sector was slower than expected; public
funding for construction projects has been “eaten up by
inflation.” Reports of project cancellations also continued
across different subsectors. A general contractor in
northeastern Minnesota said, “We are busy but there
appears to be less opportunities than usual for this time
of year.” Several contacts noted that subcontractors
remained busy, but projects tended to be smaller jobs.
Residential construction remained low but there were
modest signs of improvement in single-family permitting
in some markets.
Commercial real estate was down since the last report.
Most subsectors showed little change. However, office
I-2
Federal Reserve Bank of Minneapolis
property continued to struggle. Increased subleasing
was compounding already-higher vacancy rates. Two
Minneapolis office towers reportedly sold at steep
discounts from their previous sale prices. Residential
real estate sales remained stalled. A few regional
markets showed modest improvement, but most
continued to see much lower monthly sales compared
with last year.
Manufacturing
District manufacturing activity increased slightly since the
previous report. A regional manufacturing index
indicated increased activity in Minnesota, North Dakota,
and South Dakota in May from a month earlier.
Sentiment among manufacturing contacts was more
mixed. A metal fabricator reported that recent activity
was strong and could be stronger if they could secure
adequate workers. Reports from heavy equipment
producers indicated orders had slowed significantly as
more customers were choosing to repair rather than
replace equipment due to higher financing costs.
Agriculture, Energy, and Natural Resources
District agricultural conditions weakened slightly since
the last report. Most of the District’s corn and soybean
crop was reportedly in good or excellent condition;
however, wheat crops were in worse shape as the
harvest approached. Persistent drought conditions in the
eastern portion of the District, particularly in South
Dakota, improved slightly with recent precipitation.
District oil and gas exploration activity decreased slightly
since the previous report.
Minority- and Women-Owned Business Enterprises
Activity among minority- and women-owned business
contacts remained steady, and their outlook for the
following months was positive overall. While contacts still
perceived prices as being high, they expected prices
would remain flat in the coming months. Hospitality and
retail business owners were still able to pass higher
costs down to consumers but were skeptical of their
ability to continue doing so. Demand for workers was
strong, and the ability to hire remained challenging.
While some contacts were making downward revisions
to their planned capital expenditures because of higher
interest rates, many others were reportedly moving
forward with investing. A supplier of restaurant
equipment shared that demand was even higher this
year among minority-owned restaurants because they
tend to rely less on financing. ■
For more information about District economic conditions
visit: minneapolisfed.org/region-and-community
 Federal Reserve Bank of Kansas City
The Beige Book ■ June 2023

Summary of Economic Activity

The level of economic activity across the Tenth District changed little during June, with a mix in performance across seg-
ments. Although hiring remained flat generally, expected employment levels at most businesses continued to point down-
ward. Businesses predominantly reported relying on natural turnover and attrition to reduce their headcounts, rather than
layoffs. Consumer spending rose, but at a more moderate pace after surging in recent months. Homeowners in several
District states indicated that recent changes to tax assessments of their homes increased their monthly housing expens-
es, which could persistently impair their ability to spend on more discretionary items. Concerns about the adverse effects
of higher financing costs on credit quality were pervasive, spanning consumer segments, commercial real estate, and
small businesses. Energy activity in the District decreased significantly as weak oil and gas prices continued to squeeze
profitability. Oil and gas contacts noted that capital expenditures are down from this time last year and further declines are
expected, despite steady access to credit. Expectations that dry conditions will reduce crop yields pushed several com-
modity prices higher, but contacts noted that lower production could still limit revenues for many producers.

Labor Markets Prices

Labor conditions remained mostly unchanged in the
Tenth District during June, with noticeable differences
across sectors. Manufacturing contacts reported modest
declines in employment amid slowing orders and weak-
ening demand. In contrast, services contacts reported a
slight increase in hiring driven by steady consumer
spending. Despite the more sluggish pace of hiring
recently, wages continued to grow moderately driven
largely by still-tight labor conditions for services firms.
Although the level of hiring was mostly unchanged,
expectations for job growth and labor utilization over the
next 6 months continued to soften. In fact, contacts
generally expected a slight decline in their employment
levels over the coming months and are reportedly al-
ready reducing hours worked. When asked, the over-
whelming majority of contacts indicated they are not yet
planning to layoff workers to reach a lower headcount.
Instead, they indicated plans to post fewer positions and
pause hiring activity in lieu of laying off employees. For
example, one contact expressed that “pausing hiring
now and relying on attrition helps to avoid harder deci-
sions later.”
The pace of price growth was mixed across the regional
economy. Manufacturing contacts reported prices grew
at a slight pace, continuing to moderate from historically
high growth. Most non-durable manufacturers even
reported declines in prices for finished products. But
services businesses reported steady price growth at a
moderate pace for inputs and selling prices, and some
expansion of profit margins. Particularly, retail trade and
leisure and hospitality businesses demonstrated im-
proved ability to pass price increases to customers. Most
businesses expected prices to continue to increase
moderately over the next six months.
Consumer Spending
Following a surge in spending in recent months, the
pace of spending growth slowed to a moderate pace in
June. Contacts at restaurants and retail establishments
reported ongoing strength, but consumers were report-
edly much more sensitive to hotel rates in recent weeks.
Several contacts noted a pickup in business travel during
the weekdays partially offset the moderate decline in
weekend hotel stays by leisure travelers, and that occu-
pancy declined last month after rising steadily for over a
year. Auto purchases remained subdued in most District
states.

J-1

Community Conditions
Small and micro businesses continued to experience
financial difficulties due to the rising cost of inputs and
hiring constraints. Contacts reported recent financial
challenges caused them to increasingly access non-
traditional forms of credit with higher interest rates, such
as credit cards and online lending platforms. Moreover, a
growing number of businesses reported paying only their
minimum credit card payment, or missing payments
completely, which has negatively impacted their credit
reports. While distressed financial conditions limited
access to loans from traditional lenders, community
development financial institutions reported strength in
the ability to provide loans with rates below 10% for
qualified borrowers.
Manufacturing and Other Business Activity
Manufacturing activity declined at a moderate pace, but
service contacts reported a moderate increase in activity.
Manufacturing contacts reported broad based declines,
including reduced order demand and shorter order back-
logs. Furthermore, manufacturing contacts expect busi-
ness conditions will soften in coming months, noting
continued weakening in order back logs and a further
deterioration in demand. Despite softening in business
conditions for manufacturing firms, business contacts
expressed a continued willingness invest through capital
improvement projects, albeit at a much slower pace than
a year ago. Service contacts generally indicated much
healthier business conditions with a moderate expansion
in the demand for their services. Despite current favora-
ble business conditions, service contacts expect a sof-
tening in activity in the coming months driven by expec-
tations for weaking demand. Contacts in advertising and
marketing were an exception, already feeling a stark
pullback in customer demand. Moreover, advertising
contacts indicated the onset of AI was accelerating the
declines in demand for out-of-house service providers.
Real Estate and Construction
Several home builders indicated activity picked up over
the past couple of months. Construction was supported
both by promotional deals offered by builders that miti-
gated the effects of higher mortgage rates and by a
stabilization in the costs of building materials. Some
contacts suggested that slowing commercial real estate
construction could further boost growth in the supply of
housing over coming months because workers may be
more available and materials prices somewhat lower.
Homeowners in several District states indicated recent
changes to tax assessments of their homes increased
monthly expenses, which may persistently impair their
spending power.
J-2
Federal Reserve Bank of Kansas City
Community and Regional Banking
Contacts’ views on loan demand were mixed across the
District last month, but concerns about the effects of
rising credit costs, particularly on consumer loan types,
were ubiquitous. Contacts also noted concerns for com-
mercial real estate (CRE) credit quality, particularly
credits backed by office properties, and expected credit
quality to worsen across all loan types over the next six
months. Credit standards remained unchanged, though
some respondents highlighted reduced risk appetite for
CRE deals. Deposit balances declined in June as cus-
tomers moved to competitors offering higher yields or
invested in U.S. Treasuries after the resolution of the
debt ceiling. Deposit insurance coverage and the desire
for diversification also drove movement of large custom-
er balances and contributed to continued tightening in
banking system liquidity.
Energy
Tenth District energy activity declined moderately last
month. The number of active rigs decreased significantly
as weak oil and gas prices continued to squeeze profita-
bility. District firms reported a substantial decline in reve-
nues, profits, and supplier delivery times since the last
report. Profits and supplier delivery times are expected
to continue declining over the next six months. Accord-
ingly, District firms anticipate further reduction in activity
in the near term. The average price needed for a sub-
stantial increase in drilling to occur remains above long-
term price expectations for oil and gas, indicating that
future production growth may be constrained for a while.
Contacts noted that capital expenditures are down from
this time last year and further declines were expected,
despite steady access to credit.
Agriculture
Agricultural economic conditions in the Tenth District
were steady through June. The price of most major
commodities increased moderately from the previous
month as drought intensified in many major crop produc-
tion areas across the nation. Expectations for dry condi-
tions to reduce yields pushed prices higher, but lower
production could limit revenues for some producers.
Through mid-June, an average of about 15% of corn and
soybean acres and nearly 30% of winter wheat acres
were in poor or very poor condition across all District
states. Dry weather also continued to limit grass and
feed supplies, resulting in higher costs for many cattle
producers. Despite concerns about the potential for
reduced profitability ahead, agricultural lenders contin-
ued to report strong credit conditions. ■
For more information about District economic conditions visit:
www.KansasCityFed.org/research/regional-research
 Federal Reserve Bank of Dallas
The Beige Book ■ June 2023

Summary of Economic Activity

The Eleventh District economy continued to expand modestly buoyed by gains in the service sector and single-family
housing. Manufacturing output and retail sales fell. Credit conditions tightened further, and loan demand continued to
decline. Drilling activity dipped due to lower oil and gas prices, while recent rains boosted district agricultural conditions.
Local nonprofits continued to cite higher demand for assistance. Employment rose moderately, and wage growth re-
mained high. Input cost and selling price pressures were elevated in the service sector but largely subsided in manufac-
turing. Perceptions of business conditions continued to worsen as uncertainty rose, and contacts noted that diminishing
demand, higher labor costs, the rising cost of credit, and inflation were weighing on outlooks.

Labor Markets
Employment grew moderately over the reporting period.
Hiring slowed to a crawl in manufacturing, while service
sector firms added to payrolls at an average pace. While
oilfield services firms were still hiring and noted signifi-
cant challenges in recruiting workers, more layoffs were
seen in natural gas regions due to weak outlooks. Scat-
tered reports of layoffs also came from transportation
services and manufacturing. Recruitment remained a
challenge for several firms. Reports of labor supply
constraints continued in the health care sector and there
were mentions of worker shortages in some other sec-
tors as well, including transportation and retail. In a June
Dallas Fed survey of more than 350 executives, 44
percent of firms noted being understaffed and looking to
hire while 12 percent said they were opting not to hire
despite being shorthanded.
Wage pressures were little changed, remaining elevated.
Higher labor costs continued to be a primary concern for
many firms including nonprofits, though there were some
mentions of easing in IT wages.
Prices
Price pressures were mixed; still elevated in the service
sector but fully subsided in manufacturing. Fuel and
construction materials prices were flat to down over the
reporting period. Oilfield services firms reported declines
in day rates for drilling rigs but stable frac fleet costs.
Several contacts cited higher borrowing costs. Airlines
reported high ticket prices amid strong demand and
constrained capacity.
Manufacturing
Texas manufacturing output contracted slightly in June,
following several months of largely flat activity. Output
was flat to down in many industries, though increases
were seen in fabricated metals, machinery and transpor-
tation equipment manufacturing. New orders fell at a
fairly similar pace as in the prior reporting period, which
a few manufacturers attributed to customer destocking
and slowing construction activity. Reports from refineries
and chemical producers were mixed. Overall, manufac-
turing outlooks worsened further, and uncertainty contin-
ued to climb.
Retail Sales
Retail sales dipped modestly in May and June after
increasing in April. Auto dealers noted mixed activity,
with some reporting strong demand for new vehicles and
others noting declines. Pharmacies and building material
and garden supply retailers continued to cite higher
sales, while clothing, food and beverage, and nonstore
retailers saw declines. Inventories increased on net.
Overall outlooks were little changed but weak, and some
contacts said it remained challenging to plan for the next
six to 12 months.
Nonfinancial Services
Service sector activity continued to expand albeit at a

K-1

rather modest pace in June. Revenue growth was led by
transportation and warehousing services followed by
miscellaneous service and professional, scientific, and
technical service firms. Healthcare revenues declined,
and demand for health services, though improving, re-
mained below pre-pandemic levels. Accommodation and
food services firms said revenues continued to weaken
which they attributed to a slowdown in leisure spending
stemming from economic uncertainty. Staffing firms
noted mixed demand, with flat activity in manufacturing
but persistent strong placements of white-collar workers
in the service sector, particularly healthcare. Airlines
continued to report strong demand, mostly for leisure
travel. Business travel activity remained uneven, with
solid demand from the public sector but declining activity
from the technology and energy industries. Overall out-
looks were flat, but several contacts said that heightened
business uncertainty had put buying decisions and pro-
jects on hold.
Construction and Real Estate
Housing demand rose during the reporting period. Exist-
ing-home sales increased, and builders noted solid
demand, particularly of quick move-in or inventory
homes, as buyers were hesitant to deal with the uncer-
tainty surrounding mortgage rates. Dallas–Fort Worth
and Houston were characterized as the strongest mar-
kets. Incentives such as rate buydowns remained in
place, and prices were largely stable, though there were
reports of increases in selected areas. Construction
cycle times have improved, though a shortage of trans-
formers was dampening completions. Builders have
reaccumulated their backlogs of build-to-suit homes, and
housing starts are expected to increase in the second
half of the year. Outlooks remained cautious, and con-
tacts noted tighter lending for construction and develop-
ment loans.
Activity in commercial real estate was little changed
since the last report. Apartment rents were flat to up, and
leasing activity picked up moderately. Office markets
continued to face headwinds, while industrial markets
generally remained solid. Investment sales activity
stayed subdued, and contacts said banks were raising
the loan-to-value ratios on loans. Outlooks were mixed.
Financial Services
Loan demand declined for the seventh period in a row,
and most bankers expect a further deterioration over the
next six months. Overall loan volumes continued to fall,
with particular weakness seen in consumer lending.
While commercial real estate and commercial and indus-
trial loan volumes continued to see marked volume
declines, residential real estate lending remained stable.
K-2
Federal Reserve Bank of Dallas
Loan nonperformance increased, with the rise led by
commercial real estate loans. Credit standards and
terms continued to tighten, and loan pricing continued to
rise. Bankers’ outlooks remained pessimistic, with con-
tacts expecting a further contraction in business activity
and an increase in nonperforming loans over the next six
months.
Energy
Drilling activity for oil and gas wells declined over the
past six weeks. The Eleventh District rig count fell mod-
erately as lower prices for crude and natural gas made
some projects uneconomical. Well completions were
holding up better than drilling activity. Most contacts
reported that tighter credit conditions since February
have had slight to no impact on their firms, though a few
independent producers said it had considerably reduced
their ability to invest in new projects. Outlooks varied.
The industry is still largely expected to increase oil-
directed drilling and completion activities modestly
through year end, while prospects on the natural gas
side remained weak due to subdued prices.
Agriculture
Drought conditions eased substantially over the past six
weeks, with now less than a quarter of the district in
drought. Increased soil moisture broadly improved crop
and pasture conditions, though heavy rains caused
significant disruption to cotton planting in the Texas High
Plains. A sizeable portion of cotton acreage in that area
may not be harvestable this year, either because of
prevented planting or crop flooding. Row crop prices
generally moved up over the reporting period, and cattle
prices increased dramatically, driven by steady demand
for meat but reduced supplies of both cattle and beef.
Community Perspectives
Nonprofits noted increased demand for their services.
Housing instability and affordability remained a top con-
cern, and several contacts said that inflation and gentrifi-
cation of neighborhoods has made housing costs, includ-
ing property taxes, unaffordable for low to moderate
income households. As a result, some are doubling up
and living with other families in the same home. Fund-
raising was a challenge for some nonprofits, and a con-
tact noted that the American Rescue Plan Act (ARPA)
funds were running low. A nonprofit said age restrictions
on certain program funding was making it challenging to
provide services to other age groups. House Bill 8 re-
cently passed by the Texas legislature will add about
$680 million in the state budget for community colleges.■
For more information about District economic conditions visit:
www.dallasfed.org/research/texas
 Federal Reserve Bank of San Francisco
The Beige Book ■ June 2023

Summary of Economic Activity

Economic activity in the Twelfth District softened modestly during the mid-May through June reporting period. Labor
availability improved and overall labor market conditions eased moderately. Price increases persisted, while wage
growth slowed notably across several sectors. Retail sales moderated, and activity in the services sectors eased some-
what. Demand for manufacturing goods was solid but weakened slightly, while conditions in agriculture and resource-
related sectors were mixed. Residential real estate activity was mixed while that of commercial real estate eased further.
Conditions in the financial sector remained generally unchanged over the reporting period and lending standards contin-
ued to tighten. Communities across the Twelfth District were challenged by a lack of affordable housing and small busi-
nesses’ limited access to credit. Contacts expressed concern over a weaker outlook for the economy and increased
overall uncertainty.

Labor Markets
Labor market conditions eased moderately during the
reporting period. Labor availability improved, and em-
ployers across sectors reported receiving more job appli-
cations in recent weeks. Contacts highlighted that hiring
for permanent, full-time positions was reportedly easier
than for contract-based or part-time roles. In addition,
hiring challenges persisted in health care and hospitality,
where demand for workers continued to outstrip supply.
Employee turnover generally improved but remained
above pre-pandemic levels in retail and consumer ser-
vices. Layoffs continued, albeit at a slower pace, in the
financial services and technology sectors. Staffing levels
in other sectors were generally steady, but employers
adjusted their future hiring plans in response to overall
economic uncertainty. Employers facing moderating
demand favored reducing staff hours over layoffs.
Wage growth slowed notably across several sectors.
Improved labor availability led to wage increases closer
in line with historical rates, particularly for entry-level
positions, in construction, manufacturing, retail, financial
services, and technology. In contrast, contacts continued
to report paying above-average salaries for experienced
and skilled workers in consumer and business services.
In addition to higher pay, some employers offered ex-
panded benefits, training, and advancement opportuni-
ties to attract and retain workers.
Prices
Price increases persisted at a steady pace relative to the
last reporting period. Reports noted elevated inflation
across several industries and products, including utilities,
insurance, used vehicles, health care, pet care, and
some construction materials, such as aluminum, con-
crete, and electrical equipment. However, prices of some
goods and services were reportedly stable or down in
recent weeks, including those for gasoline, fabricated
materials, and banking services. One manufacturer
reported significant reductions in input costs in recent
weeks but also noted not planning to lower final prices
because of the cumulative cost pressures incurred over
the past three years.
Community Conditions
Conditions in the community support and services sector
remained mixed. Some contacts in education, housing
services, and community support reported stable or
improving conditions for funding and hiring. At the same
time, representatives from small businesses and com-
munity banks mentioned more limited availability of
funds. Contacts across the District reiterated difficulties
meeting the demand for support services, and several
continued to report the persistence of housing insecurity
and homelessness. Contacts in Alaska highlighted ongo-
ing shortages of police services and childcare providers.
Retail Trade and Services
Overall retail sales moderated in recent weeks. Fading
fiscal stimulus at the state level and reduced excess
savings reportedly weakened retail spending. Consum-
ers continued to trade down to lower cost items and
reduced their spending on nonessential goods. Contacts
from Hawaii and Utah indicated strong demand for retail
and services supported by robust growth in tourism and
population levels. Additionally, online retail demand

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 Federal Reserve Bank of San Francisco

picked up with higher sales to consumer markets in Asia. Real Estate and Construction
Activity in the consumer and business services sectors Residential real estate activity was mixed in recent
eased somewhat. Demand for business and leisure weeks. Demand for single-family homes was reportedly
travel in the District moderated despite the number of strong, but low inventories and high mortgage rates
visitors and conventions remaining largely unchanged in limited sales. Demand for multifamily housing remained
recent weeks. Spending on legal and insurance services solid, though a contact in Southern California noted that
declined. Production activity in the entertainment and it has recently taken longer to rent out apartments. Rent-
media industries remained strained by ongoing collective al rates edged up. Contacts across the district reported a
agreement negotiations between the writers’ unions and slowdown in new construction, particularly for single-
major studios. Additionally, art galleries and institutions family homes, citing uncertainty over the economic out-
reported facing significant headwinds due to smaller look and high financing costs. The availability of materi-
audiences and declining donations. als continued to improve somewhat, though shortages
persisted.
Manufacturing
Activity in the commercial real estate market was down
Manufacturing activity weakened slightly but remained
on balance. Limited credit availability reduced demand
solid overall. New manufacturing orders for apparel,
for commercial space and curtailed construction slightly.
electronics, and furniture softened, while demand for
However, contacts in Utah reported strong construction
capital equipment, aerospace, and wood products
activity for industrial and retail spaces. Rental rates for
strengthened. Conditions in metal production and the
industrial space reportedly plateaued, largely due to
recycling industry remained largely unchanged. Capacity
weaker demand amid ongoing economic uncertainty,
utilization inched down, consistent with overall lower
while rents for retail space edged up. The office sector
demand. Shipping and some input costs decreased over
remained weak. One Northern California contact noted
the past few weeks as supply chains and availability of
that muted brick-and-mortar sales, high operating costs,
raw materials continued to improve.
and safety concerns limited leasing demand for down-
Agriculture and Resource-Related Industries town office space.
Conditions in agriculture and resource-related sectors
Financial Institutions
were mixed. Expanded ocean freight capacity and lower
Conditions in the financial sector remained generally
shipping costs supported exports, but lingering backlogs,
unchanged over the reporting period. Loan demand was
the war in Ukraine, and a strong dollar limited access to
largely stable but some contacts at regional institutions
some international markets. Domestic retail demand for
reported slower loan origination in recent weeks, espe-
agricultural products softened and demand from the food
cially those focused on the residential and commercial
services sector plateaued. Demand for timber rose.
real estate markets. Banks have reportedly faced less
Produce yields across the District were broadly up, re-
variance in deposit flows compared to the previous re-
covering from the wet winter and spring. However, inven-
porting period despite strong competition for deposits.
tories of some foods such as raisins and nuts declined.
Lending standards tightened, and credit quality remained
Major seafood stocks edged up. Rising labor and insur-
strong despite some observed increase in delinquency
ance costs put upward pressure on production expens-
rates. Reports also noted lingering liquidity concerns and
es, while past rains somewhat offset irrigation costs. One
general uncertainty both over the economic outlook and
contact noted that ongoing capital investments helped
within the sector. ■
boost productivity and curtail labor costs in the agricul-
ture sector.

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